U.S. Appeals WTO Ruling Against Boeing Aircraft Subsidies

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By Bryce Baschuk

The Trump administration appealed a World Trade Organization ruling that found the U.S. government maintained a series of illegal subsidies to the Boeing Co. for the production of its 737MAX aircraft.

The U.S. contested the WTO’s June 9 compliance decision that said a $325 million dollar Washington state tax cut for Boeing disadvantaged its European competitor—Airbus Group SE—in violation of international trade rules.

The appeal marks the latest stage of a decades-long aircraft dispute between the U.S. and the European Union that followed the dissolution of their 1992 bilateral agreement on trade in large civilian aircraft.

Three WTO appellate body judges will now evaluate the merits of the U.S. appeal and attempt to issue a ruling by Nov. 8, although that date may be extended due to a series of delays and staffing shortages.

Challenges WTO Methodology

In a WTO filing published Sept. 18, the U.S. said the panel erred in its interpretation of various WTO agreements and failed to make an objective assessment of the mater in issuing its ruling.

The U.S. contested 10 aspects of the ruling including the scope, calculations, and methodologies applied in the June 9 ruling.

Among the Trump administration’s complaints about the ruling, the U.S. said the appellate body:

  •  did not have authority to evaluate procurement contracts between Boeing and the U.S. Department of Defense;
  •  incorrectly calculated the approximate rate of subsidization stemming from the Washington state tax cuts;
  •  did not objectively assess the price differences between Boeing and Airbus’s various sales campaigns; and
  •  inaccurately determined that the Washington state tax cuts resulted in genuine and substantial loses to Airbus sales in various countries.

The U.S. filed the appellate request on Aug. 10, but the WTO did not publish it until Sept. 18.

Mixed Ruling

The Sept. 18 filing makes good on U.S. Trade Representative Robert Lighthizer’s prior threat to appeal the WTO ruling despite the fact that it generally favored the U.S.

The June 9 compliance ruling rejected the EU’s allegations that dozens of state and federal programs provided Boeing with billions of dollars in illegal U.S. subsidies.

The compliance panel, however, did side with the EU’s argument that Washington state did not end a business and occupancy tax reduction for Boeing’s production of 152 737MAX aircraft to companies in Canada, Iceland, and the United Arab Emirates.

Following the ruling, Lighthizer claimed victory in the case and urged the EU to forge a negotiated settlement to remove all WTO-inconsistent subsidies.

EU Appeal Pending

The EU appealed the compliance ruling on June 29 and claimed the WTO erred when it declared billions of state and federal subsidies for Boeing complied with international trade rules.

The WTO appellate body is reviewing the merits of the EU’s appeal and is slated to issue a ruling before the end of the month, although the ruling could undergo delays.

The U.S. and the EU agreed in 2012 that, in the case of an appeal, they would “enable the appellate body to circulate its report to the members within 90 days from the date of notification of the appeal to the DSB.“

This past summer the seven-member WTO appellate body lost two of its panelists and many cases have undergone delays because of the complexity of the proceedings under review.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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